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Kolosus Holdings Limited - Financial Report
Release Date: 19/12/2002 17:30:04 Code(s): KOS
Kolosus Holdings Limited - Financial Report
ISIN: ZAE000008504
Share code: KOS
FINANCIAL STATISTICS
Reviewed/ Reviewed/ Audited/
Oorsig Oorsig Geouditeerd
6 months/ 6 months/ 12 months/
6 maande 6 maande 12 maande
31/10/2002 31/10/2001 30/04/2002
Number of shares in issue 560,40 560,40 560,40
(million)
Earnings per share (cents) - 0,55 0,27 1,34
basic (cents)
Earnings per share (cents) - 0,54 0,26 1,32
diluted (cents)
Earnings per share (cents) - 0,55 0,11 2,16
headline (cents)
Nett asset value per share 32,34 29,70 32,06
(cents)
RECONCILIATION OF HEADLINE
EARNINGS
2002 2001 2002
R`000 R`000 R`000
Net profit 3 061 1 534 7 530
Impairment of property, - - 132
plant and equipment
Restructuring costs,
discontinued and other
abnormal costs - (936) 4 445
3 061 598 12 107
GROUP SEGMENTAL REPORT
2002 2001 2002
R`000 R`000 R`000
Revenue
Foods 253 488 287 942 543 949
Leather 313 506 356 172 622 351
Investments - - 1 822
Total 566 994 644 114 1 168 122
Results
Foods 12 105 6 057 19 345
Leather 2 133 12 316 19 323
Investments 481 618 (2 879)
Other 1 065 (1 735) (2 650)
Total 15 784 17 256 33 139
GROUP INCOME STATEMENT
Reviewed/ Reviewed/ Audited/
Oorsig Oorsig Geouditeerd
6 months/ 6 months/ 12 months/
6 maande 6 maande 12 maande
31/10/2002 31/10/2001 30/04/2002
R`000 R`000 R`000
Sales 566 994 644 114 1 168 122
- continuing operations 566 994 594 429 1 117 303
- discontinued operations - 49 685 50 819
Cost of sales (499 468) (564 978) (1 015 380)
Gross profit 67 526 79 136 152 742
Impairment of assets - - (132)
Abnormal items - - (4 445)
Distribution, administration (51 742) (61 880) (115 026)
and other expenses
Operating profit 15 784 17 256 33 139
- continuing operations 15 784 17 366 33 239
- discontinued operations - (110) (100)
Finance costs (13 039) (15 973) (26 311)
Share of associates 399 882 1 715
Profit before tax 3 144 2 165 8 543
Taxation (83) (631) (992)
Profit from ordinary 3 061 1 534 7 551
activities
Minority interest - - (21)
Net profit 3 061 1 534 7 530
GROUP STATEMENT OF CHANGES
IN EQUITY
2002 2001 2002
Share capital 5 604 5 604 5 604
Share premium 515 718 515 718 515 718
Non-distributable reserves 13 488 13 488 13 488
Balance at the beginning of 13 488 13 488 13 488
the period
Movement for the year - - -
Accumulated loss (353 592) (368 398) (355 150)
Balance at the beginning of (355 150) (365 916) (365 916)
the period
Profit for the period 3 061 1 534 7 530
Currency translation 162 (4 016) 1 295
differences
Hedging reserve (1 665) - 1 941
181 218 166 412 179 660
GROUP CASH FLOW STATEMENT
Reviewed/ Reviewed/ Audited/
Oorsig Oorsig Geouditeerd
6 months/ 6 months/ 12 months/
6 maande 6 maande 12 maande
31/10/2002 31/10/2001 30/04/2002
R`000 R`000 R`000
Operating profit 15 784 17 256 33 139
Depreciation 8 771 11 631 21 971
Surplus on disposal of fixed (118) (936) (828)
assets
Impairment of assets - - 5 080
Foreign exchange differences - - (124)
24 437 27 951 59 238
Changes in working capital (19 542) (9 682) (7 530)
Finance costs (13 039) (15 973) (26 311)
Taxation paid 637 (730) (1 221)
Net cash flow from operating (7 507) 1 566 24 176
activities
Net cash inflow from fixed
asset
acquisitions and investment 1 069 3 974 1 202
activities
(Increase)/decrease in
interest bearing
borrowings and bank (6 438) 5 540 25 378
GROUP BALANCE SHEET
Assets
Non-current assets 120 721 155 551 131 770
Fixed assets 106 180 140 239 117 620
Investments and loans 6 962 7 306 7 579
Long-term debtors 7 579 8 006 6 571
Current assets 377 904 365 701 347 158
Inventories 241 321 204 721 221 188
Receivables and prepayments 131 992 152 847 125 970
Cash and cash equivalents 4 591 8 133 -
Total assets 498 625 521 252 478 928
Equity and liabilities
Capital and reserves 181 218 166 412 179 660
Share capital 5 604 5 604 5 604
Share premium 515 718 515 718 515 718
Reserves (340 104) (354 910) (341 662)
Minority interest 453 432 453
Non-current liabilities 13 792 27 894 15 165
Long term interest bearing 3 180 15 406 3 778
borrowings
Retirement benefit 10 612 12 488 11 387
obligation
Deferred taxation (204) 45 -
liabilities
13 588 27 939 15 165
Current liabilities 303 366 326 469 283 650
Trade and other payables 120 999 116 013 113 824
Bank overdrafts and short
term borrowings 172 000 195 422 160 370
Provisions 6 777 10 939 5 718
Tax liabilities 3 590 4 095 3 738
Total equity and liabilities 498 625 521 252 478 928
ACCOUNTING POLICIES
The accounting policies adopted are consistent with the previous financial
statements. The financial information has been prepared in accordance with and
complies with South African Generally Accepted Accounting Practice (AC 127) and
the Companies Act.
Introduction
During October 2002 the Group`s head office was accidentally
set on fire and substantially destroyed. Thankfully no
injuries were incurred and the Board and I would like to
commend the staff for the cool courage they displayed. Their
actions together with our disaster recovery procedures
essentially allowed the Group head office to resume operations
within a week. The recovery of secretarial documentation will
however be a lengthy exercise. Our sincere thanks go out to our
staff for their behaviour on the day and for their commitment
in the recovery process.
Review of Operations
The Group has recorded a net profit after interest and tax of
R3,1 million. This is an improvement on the previous year
especially since the current six months excludes profits from
the Zimbabwean operation due to the decision not to consolidate
its operations. A comparative position would be R3,1 million
compared to R978,000.
The improvement in profitability is pleasing but has been
driven mainly by the excellent results of our feedlot operation
which has performed well beyond expectation. Meat prices have
favoured our trading, and will continue to do so for the
ensuing three months after which prices are expected to
decline.
In contrast to the previous year Kolosus Automotive Leathers
(KAL), our automotive business, has traded efficiently, but has
lacked turnover to capitilise on good cutting yields and raw
material usage. All efforts are ocused on ensuring quality
production, and seeking new sources of revenue.
Mossop Western Leathers (MWL) has maintained its return to
profitability and is looking forward to an improved third
quarter. Retail sales have been particularly slow in the second
quarter with shoe manufacturers unable to secure significant
orders. This is, however, now improving and it is expected that
the December holidays and the January return to school period
will improve turnovers and profitability. Exciting
possibilities for export into Europe are currently being
explored as are research and development projects with auto
manufacturers.
African Hide Trading (AHT), after an initial rebound, has
continued to disappoint with its performance. Whilst the skins
and ostrich business has shown marked improvement, the wet blue
operation continues to be of major concern. New strategies
have been formulated, not least of which is the greater use of
Group synergies, and a major change in buying and selling
patterns. Management has ocusedd its views, and changed its
approach significantly to ensure immediate improvement in both
profitability and cash flow.
The Bull Brand Foods (BBF) business has now been fully
consolidated into one operation, and now includes our feedlots,
abattoir, meat processing and canning operations. This has
resulted in improved efficiencies, and better operational
control of the marketing and sales efforts of the canning
business. Improvement in the latter has been slow but is now
well structured and ocused. This business is now moving into
profitability.
Since April 2002 the Group has continued its upward progress.
It has shown improved profitability, maintained pressure on its
cash flows, and given its trading cycle, reduced debt in
comparison with October 2001 from R210 million to R175 million.
However trading cash flow has been adversely affected by
increased costs of imported raw materials due to the weak rand.
This has resulted in a marginal increase in debt from that at
30 April 2002. In these circumstances limited funding has been
made available to finance capital expenditure. Our bankers, who
are fully informed of all matters affecting the Group, have
given us no reason to believe that they will not continue their
support on the same basis as previously. The Group has remained
within its facility limitations throughout the past six months
and will continue to do so in the ensuing period. Cash flow is
being placed at the top of management`s priority list. Non
core properties and assets, not affected by the Seton case, are
being disposed of, and excess stock levels will be reduced.
To secure continued bank facilities, in addition to existing
arrangements, as reported in our 2002 Annual Report, further of
the Group`s assets were secured. This has been done with regard
to the assets of African Hide Trading Corporation (Pty)
Limited. The total debtor`s book has been pledged as security.
Assets secured in this regard amounts to R48,2 million. The
Group`s facilities have been reduced by R20 million to R200
million after year end.
Seton Claim
Shareholders are referred to previous disclosures and
communications in connection with the litigation between the
Company and the liquidator of Silveroak Industries, and the
Company and Seton. The case brought by the liquidator of
Silveroak Industries was heard in November 2002. It is not
anticipated that the Seton case against Kolosus will take place
before mid 2003. Judgement in the case of the liquidator of
Silveroak is expected in December 2002 or early 2003. The
estimated value of claims is in the order of R130 million.
There remains no proven claim against Kolosus Holdings Limited
and it remains impossible to determine the outcome of these
actions. Accordingly no provision has been made in these
financial statements for the alleged claims. The existence of
the alleged claims are stated only for the reason of prudent
disclosure to shareholders and valued stakeholders.
Lease and Capital Commitments
Lease commitments comprise mainly the current lease agreement
between Kolosus Automotive Leathers and the KwaZulu National
Development Corporation payable over 6,8 years. Rentals
outstanding amount to R40,6 million at the end of October 2002
or a discounted net present value of R26 million. Authorised
capital expenditure commitments for refurbishment and equipment
on loan amounts to R11,271,000. Capital expenditure amounted to
R1,444,000 (31 October 2001 R180,000). Depreciation was
R8,771,000 (31 October 2001 R11,500,000).
Solvency and Going Concern Principles
The Group`s current trading and borrowing position and its trading and cash flow
forecasts indicate that the Group is, and will remain, solvent and will continue
to be a going concern. These forecasts have been prepared assuming normal
commercial trading conditions. Due to the uncertainty, speculation on the
effects of the outcome of the court case, set out above, has not been
incorporated into these forecasts. Our bankers continue to provide facilities on
the same basis as previously. As such the financial statements have been
prepared on a going concern basis.
Post Balance Sheet Events
There were no events, between 31 October 2002, and this publication, which would
have affected the figures as presented.
Future Prospects
The pleasing results for the half year are expected to continue for the third
quarter. It is thus expected that the company should trade at least as well as
the previous year, and the possibilities exist that it will do somewhat better.
All efforts will be placed on ensuring a positive cash flow going forward.
A word of caution concerning the pending court cases. The Board is confident of
the legal advice given to date, but is aware of the complexity of the case and
the uncertainty of its outcome. Shareholders will be kept informed of
developments as they occur.
The Board also draws shareholder`s attention to the cautionary issued on 17
December 2002 in which shareholders were advised that preliminary discussions
were in progress, which if successfully concluded, could have a material effect
on the price of the company`s securities.
The Board wishes to express its sincere appreciation to management and staff for
their commitment and efforts over the past six months.
J D A C
SHAHIM BISCHOF
CHAIRPER GROUP
SON MANAGING
DIRECTOR
4-Dec-02
Review Report of the Independent Auditors
We have reviewed the accompanying condensed consolidated interim balance sheet
of Kolosus Holdings Limited and its subsidiaries ("the Group") at 31 October
2002, and the related condensed consolidated interim statements of income and
cash flows for the six months then ended. These financial statements are the
responsibility of the company`s directors. Our responsibility is to issue a
report on these condensed consolidated interim financial information based on
our review.
Scope
We conducted our review in accordance with the statements of South African
Auditing Standards applicable to review engagements. This standard requires that
we plan and perform the review to obtain moderate assurance that the financial
statements are free of material misstatement. A review is limited primarily to
enquiries of company personnel and analytical procedures applied to financial
data and thus provides less assurance than an audit. We have not performed an
audit and, accordingly, we do not express an audit opinion.
Review Opinion
Based on our review, nothing has come to our attention that causes us to believe
that the accompanying condensed consolidated interim financial statements are
not fairly presented, in all material respects, in accordance with South African
Statements of Generally Accepted Accounting Practice applicable to Interim
Financial Reporting and the Companies Act in South Africa.
Emphasis of Matters
Without qualifying our opinion, we draw attention to the following matters which
were discussed in the directors report:
Seton Claim
As disclosed in the financial statements, there are contingent liabilities with
regard to legal action from Seton amounting to approximately R130 million. At
this stage of the proceedings it is not possible to determine the outcome of
these actions. No provision was made in the financial statements for these
claims.
Going Concern
The financial statements have been prepared on a going concern basis. The Group
is mainly financed by short-term borrowings and is therefore dependent on the
continued financial support of its financiers. The Seton claim, of which the
outcome is uncertain, has been instituted and judgement is expected in the near
future. Because of these factors a risk exists that the company and Group may
not be able to continue as a going concern.
PricewaterhouseCoopers Inc.
Registered Accountants and Auditors
Chartered Accountants (SA)
Johannesburg - 4 December 2002
Date: 19/12/2002 05:30:00 PM Produced by the JSE SENS Department
